Copper prices have surged to an 11-month-high, reaching $9,164.50 a ton on the London Metal Exchange, fueled by a rally in U.S. equity markets and growing concerns over global supply constraints.
This surge comes amid a busy week for central bank meetings, where investors seek clarity on potential interest rate cuts and capex benefits of looser monetary policies.
"Copper will benefit from looser monetary policy, which will alleviate the financial strain on manufacturers and construction companies by reducing borrowing costs," said ING analyst Ewa Manthey, nothing the market expectations about reversing the hike cycle.
The sole exemption in this market trend remains the Bank of Japan, which just hiked its interest rate, ending a long negative interest rate period.
One significant factor contributing to the tightening supply of refined copper is the ongoing smelter cuts in China. Chinese smelters are being forced to reduce production due to low processing fees, which have plunged to near-zero levels.
This fee decline reflects a tighter copper ore supply market, leading to challenges in maintaining production levels. As many as 19 companies in China have agreed to production cuts through maintenance outages, lower output rates, and delays in new operations.
Furthermore, the closure of mines in Peru and Panama due to protests and operational setbacks exacerbates the supply constraints, putting upward pressure on copper prices.
Addressing the demand side of the equation, Freeport-McMoRan FCX CEO Richard Adkerson spoke to Reuters at a CERAWeek energy conference in Houston.
"The US government needs to stop giving lip service to permitting," he said, emphasizing the need for improvements in the mine permitting process in the United States.
"The question is, given our political system that we have today and the dysfunctionality of it, how do you go from getting a project verbally accepted to getting actions done," he said.
Adkerson’s successor, Kathleen Quirk, echoed this sentiment, highlighting the company’s focus on earning the support of local communities near its mine sites to enhance the social license to operate.
Freeport-McMoRan is considering expanding its copper smelter in Miami, Arizona, while prioritizing the use of copper leaching technology. However, the company faces challenges in attracting workers domestically, with Adkerson acknowledging that staffing needs are still a "work in progress."
Despite these labor market struggles, Freeport remains committed to its operations in the US and abroad. Adkerson, who will step down as CEO at the next shareholder meeting in June but remain Chairman of the Board of Directors, envisions a smooth transition in management.
"This is a seamless management change," he said, expressing confidence in the company’s continuity under Quirk’s leadership.
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